USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates reports on Friday.
by Darin Newsom, DTN Senior Analyst
OMAHA (DTN) — Given the August report is USDA's first survey-based attempt at projecting crop production, the July round of numbers could be the last time the spotlight shines on ending stocks this crop year. In regard to ending stocks, it could be the extremes in corn and soybeans that garner the most interest.
USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CDT Friday.
CORN
The pre-report average estimate for old-crop corn came in at 1.225 billion bushels, up from USDA's June projection of 1.146 bb. However, since then we've had a Quarterly Stocks report that implied ending stocks, if average fourth quarter demand is seen, of 1.3 bb. Note that this is just slightly above the pre-report high of 1.296 bb.
New-crop corn ending stocks are expected to come in at 1.773 bb, as compared to USDA's June projection of 1.726 bb. Again, though, if we incorporate the June 30 acreage estimate of 91.6 million acres (planted) and 83.8 ma (harvested) and multiply by the July pre-report yield estimate of 166.8 bushels per acre, total production would be 13.978 bb. While the average pre-report estimate inexplicably left corn production at USDA's June estimate of 13.935 bb, the high side of estimates at 14.122 bb may be closer to theoretical reality.
If USDA incorporates its own acreage numbers, increases the national average yield as expected, increases beginning stocks (2013-14 ending stocks), and leaves demand unchanged from June at 13.385 bb, 2014-15 ending stocks could be pushing the 2.0 bb mark.
The last time corn ending stocks were anywhere near this ballpark was back in 2005-06, the early days of its demand market. According to USDA, that year saw the U.S. farm price average $2.00. The difference this time around is that ending stocks to use would be smaller, possibly around the 14.5{ba1edae1e6da4446a8482f505d60d3b8e379ff6dedafe596d9ba4611a4e33a48} level (as compared to 17.5{ba1edae1e6da4446a8482f505d60d3b8e379ff6dedafe596d9ba4611a4e33a48}). Note that the high end of pre-report estimates came in at 2.309 bb. If realized, this could raise 2014-15 ending stocks to use to 17.3{ba1edae1e6da4446a8482f505d60d3b8e379ff6dedafe596d9ba4611a4e33a48}.
SOYBEANS
The game of limbo (How low can you go?!) in old-crop soybean ending stocks seems to be coming to an end. The average pre-report estimate for USDA's July report came in at 130 mb, up from USDA's June projection of 125 mb. This number seems to fall out of the realm of logic, given that the June 30 quarterly stocks number of 405 mb minus average Q4 demand would result in negative stocks on hand. Knowing this won't happen, it still seems reasonable to believe that demand of any kind to finish off the 2013-14 marketing year could put ending stocks closer to the low end of pre-report estimates at 111 mb. Such a number would still reflect the lowest Q4 demand (as a percent of total supplies) on record.
For arguments sake, let's carry roughly 110 mb forward into the 2014-15 marketing year as beginning stocks. If USDA uses its June 30 acreage numbers (84.8 mb planted, 84.1 ma harvested) and national average yield is left unchanged at 45.2 bpa, production would increase to 3.8 bb (near the high end of pre-report estimates), putting total supplies at roughly 3.925 bb.
If total demand holds steady at 3.45 bb, new-crop ending stocks would come in at approximately 475 mb. The pre-report average estimate pegged this at 408 mb with the high side coming in at 570 mb. Any way you slice it, the result looks to be bearish for new-crop soybeans, particularly if global ending stocks jump to 84.6 million metric tons as expected.
WHEAT
The bottom line for wheat is that, according to average pre-report estimates, there should be little bullish news in USDA's July round of reports. New-crop (2014-15) ending stocks are expected to come in at 585 mb, up from USDA's June projection of 574 mb (old-crop ending stocks should equal USDA's June 30 quarterly stocks figure of 590 mb). All-wheat production is expected to increase 30 mb from the June report, with the pre-report average estimate coming in at 1.972 bb.
Global ending stocks of wheat are estimated at 188.7 mmt, as compared to the June WASDE projection of 188.6 mmt. The market seems to agree with the idea that both domestic and global ending stocks are increasing, with the carry in the September-to-December Chicago futures spread strengthening to 24 cents.
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Posted with DTN Permission by Haylie Shipp
